Update 5/4/2022: I exited my short bear call vertical spread on SBUX, 44 days before expiration, for a $2.80 debit per contract/share, a loss before fees of $100 per contract. Shares were trading at $78.37, $0.30 from the entry level.
The Implied Volatility Rank at exit was 62.6%, down 29.5 points from the entry level.
I exited on the day after entry, for 87.5% of maximum potential loss, because the stock moved against the direction of the trade and I judged that exiting early would avoid even greater losses.
Shares fell by 0.4% over one day for a 139.2% annual rate. The options position produced a 35.7% loss for a -13,036% annual rate.
I have entered a short bear call vertical spread on SBUX, using options that trade for the last time 45 days hence, on June 17. The premium is a $1.80 credit per contract share and the stock at the time of entry was priced at $73.87.
The Implied Volatility Ratio stood at 92.1%.
|SBUX-bear call spread||Strike||Odds||Delta|
The premium is 72% of the width of the position’s short/long spread. The profit zone covers a 4% move to the upside and an unlimited move to the downside.
The risk/reward ratio is 1.8:1, with maximum risk of $180 and maximum reward of $320 per contract.
How I chose the trade. The trade was placed to coincide with SBUX’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $3.63 either way, based on options pricing, which gives a price range of $70.24 to $77.50.
By Tim Bovee, Portland, Oregon, May 3, 2022
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.
All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at www.timbovee.com.
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[…] SBUX earnings play entry. I’ve entered a bear call options spread on SBUX, timed to coincide with today’s earnings announcement after the closing bell, and have posted a trade analysis. […]
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